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Services improve, labor market weakens

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Offsetting economic data that showed a stronger than expected ISM Services Index, but a 71% increase from March to April in announced layoffs has major market indexes showing mixed results.

The Institute for Supply Management (ISM) said its services index (non-manufacturing) registered a 50.7 reading in April, which was up from March's 47.9 reading and above economist's forecast of 49.0. Reading above 50.0 signal expansion, while reading below 50.0 are considered to show contraction.

The index for new orders registered a 50.6 reading versus 47.7 in March, while inventories expanded for the first time in nine month with a reading of 51 versus March's 49.5 reading.

Inventory sentiment is purported to measure whether or not purchasing executives think supplies are too abundant for demand and is still expanding, but fell back to 62.5 from 66.

The employment component of the ISM Services index remained below the 50.0 mark at 48.2, but improved modestly from March's 47.9 reading.

Other economic data released during market hours had private research group Challenger, Gray & Christmas reporting that U.S. firms announced 146,399 planned layoffs in April, which was up 71% from March's 85,396 planned job cuts.

While the ISM Services Index rise did have the major indexes building gains to their best levels of the session, the Challenger report has had a negative effect on today's trade. On Friday, the Labor Department reported that the unemployment rate in April rose to 6%, and April's announced tally of job cuts continues to raise concerns regarding the current modest economic expansion moving with few signs of job growth.

After trading as high as 8,601.94, the Dow Industrials (INDU) 8,527 -0.64% have sunk to a session low and currently trade down 55 points. Dow breadth is negative with 7 advancers versus 23 declines. Shares of Boeing (NYSE:BA) $27.79 -2.9% and United Technologies (NYSE:UTX) $62.11 -2.03% lead component losers, most likely on profit taking after Friday's "sympathy" rise with the Airline Index (XAL.X) 43.88 +0.48% after broker Merrill Lynch said it thought the "worst was behind" the airlines group.

The broader S&P 500 Index (SPX.X) 927.49 -0.27% trades just 2.5 points below Friday's close with sector action mixed. Financial show a mixed-to-fractionally lower trade with the Securities Broker/Dealer Index (XBD.X) 453 +1.8% bucking weakness in the S&P Banks Index (BIX.X) 292 -0.8%, KBW Bank Index (BKX.X) 803 -0.43% and S&P Insurance Index (IUX.X) 262 -0.17%.

The very broad NASDAQ Composite (COMPX) 1,509.64 +0.45% holds a 6-point gain and session high of 1,519.48 came within 1.96-points of its December 2, 2002 relative high in early morning trade.

The narrower NASDAQ-100 Index (NDX.X) 1,155 +0.66% holds a 7.5 points gain after it too came close to its December 2nd high of 1,155.68 with a morning high of 1,152.66.

Sector strength among technology sectors has the Networking Index (NWX.X) 174.84 +3.8% leading sector gainers today, with the Semiconductor Index (SOX.X) 352.28 +2.64%, CBOE Internet Index (INX.X) 117.44 +2.13%, and Disk Drive Index (DDX.X) 86.22 +1.84% holding gains of 1% or more.

Jeff Bailey

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